Halifax Manufacturing allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts. All of Halifax's sales are for credit (no cash is collected at the time of sale). The company began 2021 with a refund liability of $340,000. During 2021, Halifax sold merchandise on account for $11,600,000. Halifax's merchandise costs is 75% of merchandise selling price. Also during the year, customers returned $575,000 in sales for credit, with $319,000 of those being returns of merchandise sold prior to 2021, and the rest being merchandise sold during 2021. Sales returns, estimated to be 5% of sales, are recorded as an adjusting entry at the end of the year. Required: 1. Prepare entries to (a) record actual returns in 2021 of merchandise that was sold prior to 2021; (b) record actual returns in 2021 of merchandise that was sold during 2021; and (c) adjust the refund liability to its appropriate balance at year end. 2. What is the amount of the year-end refund liability after the adjusting entry is recorded? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare entries to (a) record actual returns in 2021 of merchandise that was sold prior to 2021; (b) record actual returns in 2021 of merchandise that was sold during 2021; and (c) adjust the refund liability to its appropriate balance at year end. (If no entry is required for a transaction/event, select "No journal entry required in the first account field.) No Year Debit Credit 1 2021 General Journal Refund liability Accounts receivable 319,000 319,000 Required Required Prepare entries to (a) record actual returns in 2021 of merchandise that was sold prior to 2021; (b) record actual returns in 2021 of merchandise that was sold during 2021; and (c) adjust the refund liability to its appropriate balance at year end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.). No Year Debit Credit 1 2021 General Journal Refund liability Accounts receivable 319,000 319,000 2 2021 234,750 Inventory Inventory estimated returns >> 234,750 3 2021 256,000 Sales returns Accounts receivable >S 256,000 4 2021 192,000 > Inventory Cost of goods sold 192,000 5 2021 205,000 Sales returns Refund liability 266,000 6 2021 199,500 Inventory Cost of goods sold 199,500 Required: 1. Prepare entries to (a) record actual returns in 2021 of merchandise that was sold prior to 2021; (b) record actual returns merchandise that was sold during 2021; and (c) adjust the refund liability to its appropriate balance at year end. 2. What is the amount of the year-end refund liability after the adjusting entry is recorded? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the amount of the year end refund liability after the adjusting entry is recorded? Ending balance in refund liability IS 260,000
